Policy loan.

In plain English

A policy loan is money you borrow from your insurer, secured by the cash value built up inside a permanent life insurance policy. You do not have to qualify with a credit check because you are essentially borrowing against your own savings. The insurer charges interest, and you can repay on your own schedule or not at all. If you never repay, the outstanding loan plus interest is subtracted from the death benefit your beneficiaries receive.

01Why it matters

A policy loan can be quick cash without a credit check, but unpaid interest quietly grows and can shrink or even collapse the policy, leaving your family with far less than you expected.

02The math, step by step

Suppose your policy has $40,000 of cash value and you borrow $20,000 at the insurer's loan interest rate. You skip repayment for several years, so the interest compounds and the loan balance climbs. If you die with $25,000 still owed on a $200,000 policy, your beneficiaries receive about $175,000. The loan interest rate is set by your contract, so check the policy loan interest rate in your own policy documents.

03What this is NOT

04Receipts

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